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Ponzi scheme |
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Ponzi scheme A fraudulent investment scheme. Investors are promised very high returns by the promoter. The original investors often realize these high returns because their payouts are funded by cash from new investors. New investors' cash is used to pay out the original investors. The investors' funds are usually not applied to the stated purpose. However, the reported high returns attract additional inflows of capital used to pay out subsequent investors. The scheme fails when the payouts to existing investors and/or redemption requests exceed new investor inflows.
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In Ponzi schemes, investors typically are lured by an appearance of high returns to put money into a fund or some other investment. Steps in the Ponzi Scheme Ponzi schemes are quite basic but can be extraordinarily powerful. Ponzi schemes are investment scams: Returns are paid to initial investors with the money from new investors — a cycle that can be sustained only as long as there are increasing numbers of new investors. |
Ponzi schemes |
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